Thursday, January 30, 2014

IFL Group 727-227/ADV(F) (20551/1054) N251FL arrived at Long Beach Airport (LGB/KLGB) on Tuesday January 28, 2014 following a flight from Seattle-Boeing Field (BFI-KBFI).

The aircraft was originally delivered to Ansett Airlines as VH-RMX on July 18, 1974. It was converted to a freighter in December 1983 and has served with several cargo operators until being sold to International Trading Company of Yukon to be operated by the IFL Group/Contract Air Cargo.

Japanese investigators probing a lithium-ion battery meltdown on a Boeing Co 787 jetliner a year ago are looking at a battery that overheated on a Dreamliner in Tokyo this month to help unlock the cause of the earlier fire, an official from the Japan Transport Safety Board said on Wednesday.

The incident on board an ANA Holdings 787 a year ago left the battery charred and deformed, destroying evidence that would have pointed to a cause. The latest event on a parked Japan Airlines in a redesigned battery packed with insulation destroyed only one of eight cells.

"The remaining seven cells are untouched, and I think that is where the investigation will focus," Masahiro Kudo, the lead investigator on the ANA battery said during a press briefing.

That overheating and one a few days earlier on a 787 parked at Boston's Logan airport prompted aviation regulators in the U.S., Japan and elsewhere to ground the global fleet of Dreamliners for more than three months.

Authorities, without discovering the root cause of the meltdown, allowed Boeing to get its carbon composite back into the air after it redesigned the battery with insulation, a vent to eject any hot gases out of the aircraft, and encased it in a steel box to contain any fire. Finding the reason for the overheating could spur further design changes.

The United States National Transportation Safety Board (NTSB), which is looking at the incident in Boston, has sent accident investigator Mike Bauer to join the latest probe. The JAL Dreamliner's battery emitted smoke at Tokyo's Narita Airport just before take off. Japan's Civil Aviation Bureau (JCAB) is in charge of the investigation.

In the year since the first overheating, the number of 787s in operation has more than doubled to 115 planes at 16 carriers. ANA is the world's leading operator with 24 of the state-of-the-art jetliners built with carbon-fiber composite materials and a powerful electrical system to reduce weight and improve fuel efficiency.

The head of Lufthansa said the German airline plans to begin flying Airbus A380 superjumbo jets on routes to India later this year.

On Monday, India lifted a ban on landing the aircraft in the country, enabling carriers such as Singapore Airlines, Lufthansa and Emirates airline to fly the jets into the world's second-most populous nation.

Lufthansa had earlier said it had no immediate plans to use the jet on those routes.

"We are interested to use the A380 also for the major Indian markets," Christoph Franz, CEO of Deutsche Lufthansa AG, said on Wednesday in an interview in the Reuters Global Markets Forum, an online community for financial professionals.

Franz said Lufthansa definitely planned to use the jet in India but noted the launch would be later in the year, since its fleet of 10 A380s is already committed by current schedules.

He said it was possible for the summer schedule, but added, "We will likely make it for the winter flight schedule of 2014-2015".

Under India's rules, A380s will be allowed to land at the country's four main airports - New Delhi, Mumbai, Bangalore and Hyderabad - which are equipped to handle the planes.

The A380 can carry more than 800 passengers in a single-class configuration, and the government had banned their use because of concern that foreign airlines would dominate the market for international travel.

Southwest Airlines and JetBlue Airways said on Thursday that they had bought the takeoff and landing rights at Ronald Reagan National Airport in Washington that the Justice Department required American Airlines and US Airways to sell as a condition of their merger.

Southwest said it had secured 54 takeoff and landing slots at Reagan National. These will increase Southwest’s service there to 44 daily departures, from 17. The airline said it would announce destinations and schedules for these new flights later this quarter; it expects to begin flying in the third quarter of 2014.

Separately, JetBlue said it had acquired an extra 12 round-trip flights from Reagan National. In addition to its winning bid, JetBlue said that American had agreed to the permanent transfer of eight slot pairs that it had been renting since 2010. Each slot pair provides rights for a departure and an arrival.

Financial details for the transactions were not disclosed.

The sales were required by a deal reached in November with the Justice Department. American and US Airways agreed to sell a total of 104 takeoff and landing slots at Reagan National and 34 slots at La Guardia Airport to low-cost carriers.

Because of congestion problems, some airports can handle only so many takeoffs and landings every day. Those are known as slots, and their relative scarcity makes them valuable to airlines. Both Reagan National and La Guardia are subject to these controls on their capacity.

As part of the deal, American still has a handful of slots to sell at Reagan National. It sold the required slots at La Guardia to Southwest and Virgin America in December.

It also has to divest a pair of gates and ground assets at each of the following airports: Chicago O’Hare International, Los Angeles International, Boston Logan International, Dallas Love Field and Miami International.

Tuesday, January 28, 2014

Indonesian budget airline Lion Air said on Monday it planned to cancel an order for five Boeing Co. 787 Dreamliner aircraft and replace them with smaller 737 models.Lion Air first announced the order, worth $1 billion at list prices, in mid-2012 for its premium subsidiary Batik Air.Lion Air is one of the world's fastest growing airlines and has placed major orders with both Boeing and Airbus for smaller narrowbody planes as it projects fast growth in air travel demand in Indonesia's populous archipelago.But many analysts have raised questions about the sustainability of massive aircraft orders in the region, which has also seen aggressive buying from Lion Air's arch-rival AirAsia of Malaysia.Industry sources said the five 787 Dreamliners ordered by Lion Air were early production models which had been sold at discounts well above 50 percent due to their extra weight and modifications carried out after leaving the production line.Despite ongoing reliability problems on some Boeing 787 aircraft, such aircraft could be attractive to other budget carriers due to their low prices, market sources said.One such potential customer is Norwegian Air Shuttle which has said it is looking for more 787s despite complaining about teething problems in 787s it already owns."It's no secret that we are looking for more Dreamliners and it has not changed," said Norwegian Air spokesman Lasse Sandaker Nilsen."But we will not say anything specific about which companies' Dreamliners we are looking at, what Boeing has said to us, or when we may have the opportunity to obtain more."Norwegian Chief Executive Bjoern Kjes said last month the airline was in "concrete negotiations" about more 787s and was interested in getting early availability, in 2016 or 2017."I think there is a good chance that Norwegian will make an effort to obtain these planes," said analyst Tian Tollefsen at brokerage SEB Enskilda."It will of course depend on the price etc, but they have clearly said they want to grow long-haul from where they are today. Delivery in 2015 is also quite attractive."Lion Air, which had been in negotiations to buy Airbus A330 aircraft before opting for the 787, said it would need bigger aircraft than the 250-seat 787-8 and would place a new order in 2015 to serve domestic, high-frequency routes.The airline meanwhile said it had chosen CFM International engines worth $1.2 billion to power 60 new Airbus A320s which it has already ordered. The A320 competes with the Boeing 737 on short and medium routes, holding around 150 passengers.

Friday, January 24, 2014

The reliability of Boeing's pioneering 787 Dreamliner jet is improving but is still not satisfactory, Mike Fleming, Boeing's vice president for 787 support and services said on Friday.The Dreamliner's reliability rate is now around 98 percent, meaning that two out of every 100 flights is delayed, which is above the 97 percent reported in October but still short of the firm's target, Fleming told a news conference in Oslo where Norwegian Air Shuttle ASA, one of his most troubled customers, is based."I'll tell you that's not where we want the airplane to be, we're not satisfied with that reliability level of the airplane," Fleming said."The 777 today flies at 99.4 percent ... and that's the benchmark that the 787 needs to attain."We introduced the 777 in 1995 and it was in the 1999 timeframe that we saw sustained performance over 99 percent in that fleet ... to get the fleet above 99 percent you have to keep working every day, so my guess is that it will be similar to what we had with the 777," he added.Norwegian Air Shuttle, the only European budget carrier to fly long haul, has been plagued by problems with its first three Dreamliners with a series of breakdowns last year leaving passengers stranded.The Dreamliner was supposed to be a game-changer for the aviation industry as its lighter body and sophisticated engines cut fuel consumption by 20 percent.But it has been beset by problems including a battery fire that grounded all 787s in service for three months last year and forced Boeing to re-design the innovative lithium-ion battery and enclose it in a stainless steel containment box capable of withstanding an explosion. It also equipped the battery with a metal exhaust tube to vent fumes and gases outside the jet if the battery were to overheat.Although the batteries have worked reliably since then, this month Japan Airlines' maintenance crew noticed white smoke coming from the main battery of a Dreamliner, with a cell found to be showing signs of melting just two hours before the plane was due to fly."We recently had a single-cell failure in a battery on another customer's airplane and we didn't get propagation of that to other cells, other cells continued to function," Fleming said. "The containment box worked as supposed to and the vapour vented overboard as supposed to."But Fleming said the battery has not suffered an in-flight failure since the redesign and Boeing could still change the battery's design based on the conclusions of the investigation into the latest incident.

"We didn't assume we would never have another cell failure. We always assume we're going to have a failure and we design the airplane with a redundancy," Fleming said.Other issues on the Dreamliner still facing Boeing include the reliability of flight controls, particularly for the wing spoilers, brakes and electrical power components.Fleming said any compensation issue with Norwegian Air would be discussed privately but the plane maker takes responsibility for the technical faults."When our airplane breaks and our service doesn't deliver on what it's supposed to, we take responsibility," he said.

Norwegian Air Shuttle reported on Wednesday that it remains unsatisfied with the reliability of its three Boeing 787s following Sunday’s incident in which a problem with a fuel valve delayed a flight between Bangkok and Stockholm for 19 hours. Norwegian Dreamliners have suffered a series of maintenance glitches such as erroneous fault warnings, costing the airline revenue and standing with its customers.“We are not satisfied with the recent reliability issues on our 787 fleet as it causes frustration among our passengers who rely on good on-time performance,” Norwegian Air communications manager Lasse Sandaker-Nielson told AIN. He said he couldn’t offer specific dispatch reliability figures, however.Norwegian uses Boeing’s Gold Care for all maintenance on its 787 fleet. Boeing engineers working on the Norwegian fleet have come under scrutiny following reports that they short-circuited one of the airplanes when attempting to address a brake fault message, leading to a three-day grounding from December 29.Sunday’s incident came just two days before a battery malfunction in a Japan Airlines 787 just prior to its scheduled departure from Tokyo prompted an investigation by the Japan Civil Aviation Bureau and the U.S. National Transportation Safety Board, raising new questions about the integrity of a system redesign devised to mitigate the possibility of fire propagation.Battery overheating in airplanes operated by JAL and fellow Japanese airline ANA led to a worldwide grounding of the worldwide 787 fleet early last year, forcing Boeing to develop modifications to the charging system and install containment and venting systems.

Gulfstream Aerospace “is the primary growth engine for both earnings and revenue” at General Dynamics, parent company chairman and CEO Phebe Novakovic said yesterday during a fourth-quarter investor call. The company’s aerospace unit, which includes Gulfstream and Jet Aviation, had a “very good year” in 2013, she added.In fact, Gulfstream’s fourth-quarter performance contributed to the aerospace unit’s recording the best quarter over the past two years at any General Dynamics division, Novakovic noted. In the quarter, the division posted $2.135 billion in revenues, up 14.7 percent from the same quarter in 2012, while profits skyrocketed by 404.3 percent, to $348 million. For the entire year, revenues at the unit rose 17.4 percent year-over-year, to $8.118 billion, while profits soared 65 percent, to $1.416 billion.At Gulfstream, completed jet deliveries climbed last year to 144 (121 large-cabin and 23 midsize jets) versus 94 (83 large-cabin and 11 midsize) in 2012. Notably, Gulfstream delivered more G650s last year and shipments of its midsize jets “more than doubled,” Novakovic said. In 2014, she predicts that Gulfstream will deliver 158 aircraft–118 large-cabin and 40 midsize jets.Aerospace backlog at General Dynamics ended the year at $15.667 billion, up from about $13.8 billion on September 30. Novakovic said that the book-to-bill ratio in the fourth quarter exceeded 1:1, and this “not only increased backlog but [added] backlog where it was needed in the G550 and G450 programs.” As a result, G450 and G550 backlogs are now in the 12- to 15-month-range, while G650 backlog is 45 months.Novakovic said that business aviation services provider Jet Aviation was “nicely profitable” last year.

Boeing has rolled out the first 787 built at the increased production rate of 10 aircraft per month. The aircraft, a 787-8 and the 155th Dreamliner built, will be delivered to International Lease Finance Corp. (ILFC) for operation by Aeromexico.The new 10-per-month rate is the highest ever for a twin-aisle aircraft. According to Boeing, the 787 program has increased its production rate three times in just over a year, including to five aircraft per month in November 2012 and seven per month in May 2013.“This rate increase reflects the continued strong demand for the 787,” Boeing Commercial Airplanes VP & GM-787 program Larry Loftis said. Boeing assembles and delivers 787s in two locations: Everett, Wash., and North Charleston, S.C. “The entire 787 team is now focused on capturing efficiencies at this historic level of production, as well as meeting our commitment to increase the production rate to 12 per month in 2016 and to 14 per month by the end of the decade,” Loftis said.According to Boeing, to date, 115 787s have been delivered to 16 customers. The program has 1,030 total orders from 60 customers worldwide.This aircraft will be the fourth 787 operated by Aeromexico and will be used on the airline's Mexico City-London Heathrow route.

Delta Air Lines officially retired its last two DC-9 aircraft on Wednesday, January 22nd.Although Delta publicly celebrated the final farewell earlier this month with a tour spanning three states, two of the aircraft remained for ad-hoc action to support delayed 717 deliveries.Unlike the much vaunted retirement tour, the final flight ended quietly and without fanfare after landing under a clear Atlanta sky. N779NC was the lucky airplane to fly the very last commercial DC-9 flight in the United States, operating Delta 310 from Eglin Air Force Base in Valparaiso, FL to Atlanta, Georgia.The last flight caps a 48 year run of the airplanes flying the skies over the US.Last week, Delta finished ferrying the last of its inactive DC-9s to Blytheville, Arkansas. The remaining three DC-9s will begin their journey to their final home shortly.N779NC will be ferried to Charlotte, North Carolina, where it will reside at the Carolinas Aviation Museum. N782NC will be ferried to Thief River Falls, Minnesota. It is rumored that it will be donated to Northland Community and Technical College, as Northwest donated a DC-9 to the college in 1997.Another DC-9, rumored to be N675MC, will be housed at the Delta Flight Museum once it re-opens after undergoing major renovation later this summer.Dominican start-up Pawa Dominicana has been in talks with Delta to acquire 20 of their retired DC-9-50s. If successful, it seems like the old Diesel 9s could have a few more years left of flying, though not here in the US.

Thursday, January 23, 2014

Southwest Airlines 737-8H4 (35966/4239) N8324A at John Wayne Orange County Airport (SNA/KSNA) on January 19, 2014.

(Photo by Michael Carter)

Southwest continued its winning streak, closing a record-breaking year with a record-setting December quarter profit of $212 million.The airline achieved that profit of 30 cents per share, counting special items, despite the federal government shutdown that briefly slowed travel. And the fourth-quarter capped what was the 41st consecutive year of profitability for the low-cost airline, which flies more domestic passengers than any other U.S. carrier.For all of 2013, Southwest reaped a record $754 million profit, or $1.05 a share, counting special items, versus a $421 million profit, or 56 cents per share for all of 2012, also counting special charges."We are extremely proud of these record results,'' Gary Kelly, Southwest's president and CEO, said in a written statement.Southwest's profit during the last three months of 2013 was in contrast to the $78 million profit, or 11 cents per share, earned in the last three months of 2012, counting special charges.

Legislation that could mandate noise-abatement helicopter routes in the Los Angeles basin was inserted last-minute into the 1,582-page, $1 trillion federal spending bill signed by President Obama late last week. Sen. Dianne Feinstein and Rep. Adam Schiff, both California Democrats, sponsored a rider that calls on the FAA to develop mandatory helicopter noise-abatement regulations and routes within one year if voluntary measures fail to quell citizen complaints.The FAA is currently working on voluntary measures with major stakeholders and plans to issue a progress report in the coming weeks. The legislation signed into law exempts parapublic flight operations, including police and EMS, which comprise the majority of helicopter flights in the area.Helicopter noise has long been a hot-button issue in local Los Angeles congressional races, but standalone legislation aimed at the problem, most recently the “Los Angeles Residential Helicopter Noise Relief Act,” has not advanced through congressional committees.Aviation groups were quick to denounce the provision. The Professional Helicopter Pilots Association branded it “mistimed, misplaced, misworded and an egregious example of congressional trickery gone awry.”

Gulfstream Aerospace will expand its service center at Brunswick Golden Isles Airport in Brunswick, Ga. The company signed a lease with the Brunswick and Glynn County Development Authority to develop a $25 million, 110,000-sq-ft maintenance, repair and overhaul facility near its two existing hangars. The new facility will include a 73,000-sq-ft hangar that will accommodate six to nine large-cabin aircraft.The expansion is expected to create 100 jobs, a 50-percent gain on Gulfstream Brunswick’s current workforce.Groundbreaking is slated for later this year, in time for completion by May next year.A spokeswoman for Gulfstream toldAIN, “The Brunswick facility is a final-phase completion center and a service center for our large-cabin aircraft.Today’s announcement does not impact our completion capacity but will expand our maintenance capacity.” The service center is a certified FAA, EASA and Transport Canada repair station.“Brunswick played a significant role in what was a record-setting 2013 for our service organization worldwide,” said Mark Burns, president of Gulfstream Product Support. “The growth of our fleet has increased the demand for aircraft maintenance and refurbishment.”

Los Angeles International Airport (LAX/KLAX) is undergoing a more than $1.4 billion upgrade – to its domestic terminals.The airline-led projects in partnership with operator Los Angeles World Airports (LAWA) will see significant passenger-facing improvements to terminals 1, 4, 5, 7 and 8 by 2016. These are in addition to the $1.9 billion that is being invested in the new Tom Bradley International Terminal, whose first phase fully opened in September 2013.With domestic traffic account for about three-quarters of the airport’s 60.9 million passengers – more then five-times those who used the Tom Bradley terminal - during the first 11 months of 2013, these improvements will be experienced by many.Terminal 1 – Southwest Airlines is investing $400 million in a complete facelift for the 1984-era terminal. The concourse, ticketing area and baggage claim will be renovated, security will be expanded and 13 of its 14 gates will be reorganized so that they all meet the airline’s requirements for Boeing 737-800s with winglets.“I think it’s going to improve our operations and customer service,” says Steve Hubbell, senior manager of airport affairs at the Dallas-based low-fare carrier. “This does provide us with greater expansion opportunities, especially with the -800 capabilities at all of the gates.”Terminal 4 – American Airlines is chipping in $33 million to LAWA’s $148 million connector to the Tom Bradley terminal. This will ease connections to the carrier’s international flights from the new facility (and to its Oneworld alliance partners), create a new security checkpoint for arriving international travelers and install a new in-line baggage system. An added benefit is the 24.4m (80ft) of additional alleyway that the Fort Worth, Texas-based carrier will gain between 4 and Tom Bradley – I see far less aircraft towing in its future.Terminal 5 – Delta Air Lines is sinking $229 million in its home at LAX. A new ticketing lobby, baggage claim area, expanded checkpoint and premier lounge will significantly “improve the passenger experience”, says Ranjan Goswami, vice-president of Los Angeles at the Atlanta-based carrier. What’s not on the list – a connection to the Tom Bradley terminal, the possibility of which gets Goswami “excited”, he says.Terminals 7 and 8 – United Airlines is putting $412 million into its redevelopment plan for just about everything “customer-facing”, it says. This includes the concourses, ticketing lobby, baggage claim and security checkpoint.One thing is missing from these plans – gates. “We are out of gates,” Gina Marie Lindsey, executive director of LAWA, so aptly put it at a board meeting on 13 January. Major domestic carriers already average about 10 turns per gate – higher than the recommended maximum of eight turns by the US National Transportation Research Board – at LAX.The planned Midfield concourse, due in 2019, will begin to tackle the gate issue. Roger Johnson, deputy executive director of the airport development group at LAWA, calls it a “first step” and says that it will give the operator the “flexibility” to make other improvements, the first of which will be the demolition and replacement of terminal 3.“The Midfield concourse is pretty integral in addressing our constraints,” he says.

The Japan Civil Aviation Bureau has issued certification for the Airbus A330-300 aircraft, paving way for the type to enter service in Japan.This comes after the type met criteria specified in the Japanese aviation law, says the country’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT) in a statement.Skymark Airlines will be the first operator of the A330 in Japan, where it has 10 aircraft on order, Flightglobal’s Ascend Online Fleets database shows.MLIT adds that Skymark has chosen to configure its A330s with 271 seats. The aircraft will be powered by two Rolls-Royce Trent 700 engines.Flightglobal's Ascend Online Fleets database indicates that Skymark has ten A330s and six A380s on order. It will receive six A330s in 2014 and four in 2015.

Gulfstream’s next available slot for its flagship ultra-long range G650 business jet is almost four years away, according to the airframer’s parent company.Speaking on a fourth-quarter earnings call on 20 January, Phebe Novakovic, chairman and chief executive of General Dynamics, said the backlog for the aircraft is so extensive that the next available production slot is “in the 45 month range”.The backlog for the smaller products in its catalogue – the super-midsize G280 and large-cabin G450 and G550 – is also high, with manufacturing availability around nine to 12 months out.The company anticipates deliveries of 118 large-cabin jets next year, and 40 of the G280s, Novakovic says. That figure would represent a slight rise on 2013, when it handed over 110 large-cabin jets and 29 medium-size aircraft.Gulfstream has considered increasing production of the G650, but rejected this based on supply chain considerations, noting that “we're very comfortable where we are now”.“So, when you're manufacturing complex platforms with a robust and diversified supply chain, you want to be very mindful of what your supply chain can handle without driving up their cost, which then [is] reflected in your price,” says Novakovic.Long-term demand for the jet remains strong, but any “perturbation from a break in your supply chain is very, very difficult to recover from”, she notes.Gulfstream remains "the primary growth engine for both earnings and revenue" at General Dynamics, notes Novakovic.Revenue at its aerospace division in 2013 rose to $8.1 billion, up from $6.9 billion the year before.Operating profit was $1.41 billion, an increase on 2012's figure of $858 billion.

Hong Kong Express unveiled new livery on 21 January, and also said it will add new north Asia services.The new livery and logo incorporate elements of Hong Kong’s Victoria Harbour and the city’s skyline, with ample use of violet and red. It replaces the existing red and gold colours associated with sister carrier Hong Kong Airlines, and its major shareholder HNA Group.

Hong Kong Express

“The new logo and livery design will be rolled out across all of our branding towards the end of March,” says Hong Kong Express’ deputy chief executive Andrew Cowen. “We wanted to establish a new brand for HK Express to reflect and support the amazing transition that HK Express has undergone in the past year, and the fresh, youthful and dynamic sense that the new design inspires fits perfectly with our ethos as Hong Kong’s one-and-only low fare airline.”On 30 March, Hong Kong Express will start a daily Hong Kong-Seoul Incheon service. By end of 2014, the low-cost carrier plans to add more than 12 new destinations to its network and expand its fleet size from five to 11 aircraft.Flightglobal’s FlightMaps Analytics shows that Hong Kong Express will compete with carriers such as Asiana Airlines, Korean Air, Jeju Air and Jin Air on the Hong Kong-Seoul Incheon route.

Cessna quietly rolled out the first Citation Latitude jet from the company’s Wichita factory on 20 January and ran initial taxi and installed engine tests.A picture of the unpainted aircraft undergoing testing first appeared on the aviation subpage of the Reddit online community site.Cessna confirmed to Flightglobal that the picture posted on Reddit showed the first Latitude flight test aircraft equipped with Snecma Silvercrest turbofan engines.Cessna also provided a picture of the event.

The Latitude programme is scheduled to enter flight-testing early this year and achieve airworthiness certification by the end of the year.Scott Donnelly, chief executive of Cessna parent Textron, re-affirmed the Latitude’s schedule remains on track in a teleconference today with analysts, while discussing the company’s fourth quarter and 2013 earnings.“We certainly expect to have the Latitude in the market for a full year of sales in 2015,” Donnelly says.

The Latitude poses some financial challenges for Cessna this year. The delayed certification of the Cessna M2, New Sovereign and new Citation X meant Cessna’s working capital budget over-spent by “a couple hundred million dollars” in 2013, Donnelly says.Cessna had hoped to recover on working capital as the M2 and New Sovereign achieved certification in the fourth quarter and the Citation X is on track to enter service soon, Donnelly says.However, Cessna will be ramping up production of the nine-seat Latitude jet during the second half of the year, although deliveries can not begin until the flight testing programme is completed.“So we’ll be building out those aircraft, but we won't be able to sell those aircraft or deliver those aircraft until that certification happens,” he says.Cessna's sales outlook in 2014 is positive, but only because of the introduction of three business jets between late last year and early this year, Donnelly says. Overall demand is expected to remain “flatish” this year compared to 2013, he says.

Tuesday, January 21, 2014

Alaska Airlines has converted two options for Boeing 737-900ER aircraft to firm orders, bringing its total backlog for the type to 32.The deal is the airframer’s first firm order in 2014 and was announced at a delivery ceremony for Alaska’s 100th next generation 737, it says in a statement.“Alaska is proud to fly an all-Boeing fleet," says Mark Eliasen, vice-president of finance and treasurer of Seattle-based Alaska Air Group, in a statement. “The 737-900ER has proven to be an ideal upgrade for us.”The order is valued at $192 million at list prices, according to Boeing.Alaska operates 13 737-900ERs and has firm orders for 30, not including the two announced today, Flightglobal’s Ascend Online database shows. It also has firm orders for 20 737 Max 8 and 17 737 Max 9 aircraft, and options for 31 737-900ERs.The airline says that all -900ERs, including the two additional aircraft, will be delivered by 2017.Alaska converted five 737-900ER options to firm orders in September 2013, bringing its outstanding orderbook for the type to 31 aircraft at the time.

Boeing has named GE Capital Aviation Services (GECAS) as the unidentified buyer of 20 737 Max 8s and 20 737-800s.The deal, worth $3.9 billion at list prices, increases the GECAS fleet of 737s either delivered or on backlog to 482 aircraft.The GECAS order book now includes 387 737NGs and 95 737 Max aircraft.The influential lessor increased its order book because it sees demand continuing to grow for more fuel-efficient aircraft, says Norman Liu, president and chief executive of GECAS, in a statement.Boeing says the deal reinforces how the 737 series is valued in the leasing market.Both the 737NG and the 737 Max are powered exclusively by CFM International engines.As the deal was previously announced, the 737 Max order book still stands at 1,763 aircraft.

Boeing Co. predicts a jump in the proportion of aircraft financed through private placements after Norwegian Air Shuttle last week funded the purchase of five of the planemaker’s 737-800 jets using such a deal. Placements will complement so-called Enhanced Equipment Trust Certificates, or EETCs, by providing carriers with tailored solutions for smaller batches of planes at economics similar to larger transactions, according to Kostya Zolotusky, managing director of Boeing Capital Corp., who said the market could be worth several billion dollars a year. The Norwegian Air deal, which closed on Jan. 16, saw the discount carrier turn to an unspecified U.S. insurance company to pay for single-aisle aircraft worth about $450 million at list price, with boutique investment group Aviation Finance Co. Ltd. facilitating the borrowing.“There are far more airlines wanting two, three, five plane deals, with few big enough for billion-dollar EETC-size deals,” Zolotusky said in an interview at the Airline Economics Growth Frontiers conference in Dublin. “We have a lot of institutional investors that like EETCs but don’t get enough.”EETCs let airlines issue investment-grade debt at lower yields and transfer the burden of financing orders to the bond market. Purchases that employ such instruments -- in which debt is backed by the jets on which investors have a claim if the carries goes bankrupt -- are generally worth around $1 billion and involve multiple parties providing the funding. BA TransactionA typical deal saw British Airways owner IAG SA (IAG) sell $927 million of EETCs in June backed by six Boeing 787s, two 777s and six Airbus Group (AIR) A320s. Still, such sales are frequently three or four times oversubscribed, leaving investors with smaller chunks than they would have liked, Zolotusky said.Analysis also suggests EETC packages require a value of no less than $600 million, making them viable for only 15 airlines, plus or minus five, outside the U.S., the executive said.While Boeing estimates that more than 33,000 commercial aircraft will be required over the next two decades, it reckons fewer than 20 percent will be ordered by U.S. carriers as growth in travel surges fastest in emerging economies.Capital markets -- including EETCs and private placements -- will provide about 22 percent of the anticipated $112 billion in financing required for aircraft purchases this year, up from 14 percent in 2013, according to Boeing.They’ll join bank debt and cash as the primary vehicle, replacing state-backed export credit that’s forecast to shrink to 18 percent of funding from almost one-third when other lending dried up during the financial crisis, it estimates.

Jet Airways, the nation’s second-largest airline by market share, may place an order for 50 Boeing Co. aircraft worth $2.5 billion, Bloomberg TV India reported, citing people it didn’t identify.Jet, India’s biggest publicly traded carrier, may order 737 single-aisle planes, which will be used for local expansion, Bloomberg TV said in its report.Buying new planes will enable Mumbai-based Jet Airways to expand and start more routes ahead of impending competition with Singapore Airlines and AirAsia, which have both sought to start local airlines. Indian carriers are buying aircraft from Airbus and Boeing as economic growth in the world’s second-most populous nation stokes travel demand.“India’s airlines have not really kept up with the growth in the market,” said Mark D. Martin, chief executive officer of Dubai-based Martin Consulting LLC. “Demand for air travel has gone up, but there is no fleet to cater to that demand.”Jet Airways shares gained 2.3 percent to 271.5 rupees as of 12:25 p.m. in Mumbai. Jet Airways didn’t respond to an e-mail seeking comment. Boeing spokeswoman Ashmita Sethi said the query should be addressed to the airline.Demand from India and China and global growth of low-fare carriers will spur a market for $4.4 trillion worth of commercial planes in the next two decades, according to Airbus. The number of air passengers in India is forecast to triple to 452 million by 2020, according to a report by CAPA Centre for Aviation and SITA. New PlanesLast year, Boeing estimated Indian operators will need 1,450 new planes in the next 20 years. Of this, 1,201 will be single-aisle planes, according to the Chicago-based planemaker. Martin Consulting has forecast Indian carriers will need at least 200 planes just for local operations in the next 12 months.Abu Dhabi’s Etihad Airways PJSC bought a 24 percent stake in Jet last year, in the first cross-border deal for Indian carriers since rules were eased in 2012. Etihad is expanding its business in India rivaling Dubai’s Emirates Airline, which traditionally has had a stronghold in the South Asian country.Air India, SpiceJet and Jet Airways are potential candidates for the 737 Max aircraft, Boeing’s Asia-Pacific vice president Dinesh Keskar said in New Delhi in October.

Monday, January 20, 2014

In a response to a union lawsuit, Southwest Airlines on Thursday defended its right to declare an emergency and force Chicago Midway ramp employees who called in sick to prove they really were sick.In the filing in U.S. District Court in Dallas, Southwest said there was a perception that baggage handlers and other ground employees were calling in sick or refusing overtime work because they weren’t happy about contract talks.“While Southwest cannot definitively identify the reason for the increased sick calls among ramp service employees in Midway at this time, it was widely perceived to be a coordinated job action to protest the slow progress in collective bargaining that had been ongoing since 2011,” the carrier said in its response to the Transport Workers Union Local 555 filing.TWU Local 555 on Tuesday asked the federal court to bar Southwest from declaring an emergency and requiring employees to justify their use of sick leave.While the union classified the disagreement as a major dispute that should be decided in court, the airline argued Thursday that it was a minor dispute that should go to arbitration.In addition, Southwest said that it has the right to do what’s necessary to operate the airline unless the union contract doesn’t permit such actions. The union’s interpretation is that the airline isn’t allowed to do something unless the contract specifically allows it, the airline said.Southwest acknowledged in its papers that it suffered an “operational meltdown” at the Chicago airport in early January, as inadequate staffing, heavy snowfall and biting cold combined to strangle its operations.The case has been assigned to U.S. District Judge Barbara Lynn. As of mid-afternoon Thursday, no date had been set for a hearing on the TWU’s request for a temporary restraining order.Keep reading for Southwest’s version of what happened at its Midway operations, contained in Thursday’s filing.

The circumstances that led to the Company’s Declaration of Operational Emergency on January 7, 2014 begin in late December 2013, when the Company began to experience an inexplicable increase in call-offs among the MDW ramp service employees. Call-off rates had been slightly elevated throughout December 2013, and the Company anticipated a spike in calls on December 31, 2013, and January 1, 2014, because of an historical pattern of increased sick calls on those dates among all employee groups. While the Company planned for 30 to 40 call-offs on those dates, which would have been 10-12% of the employees assigned to work on those days, the actual number of call-offs was 56 (19%) on December 31, 2013, and 101 on January 1, 2014 (33%). Thus, the number of sick calls on New Year’s Day was roughly six times normal, an inexplicable increase even when the historical patterns of increased sick calls on New Year’s Day is taken into account. As a result of the unprecedented level of sick calls and adverse weather that increased the work load for Midway’s ramp service employees, Southwest was forced to use a substantial amount of mandatory overtime on both days, assigning 182 shifts of mandatory overtime on January 1, 2014.

The assignment of large amounts of mandatory overtime, however, can aggravate staffing problems because of a work rule in the Local 555 agreement called the “ten hour rest rule.” Under that rule, an employee who is assigned mandatory overtime is entitled to at least ten hours off at the end of mandatory overtime of four hours or more. An employee invoking the rule is entitled to ten hours off and pay for any shift for which they were scheduled during the ten hour rest period. The ten hour rule can be waived, and by waiving the rule the employee earns double time for any work during the ten-hour period. During the time period at issue in this case, however, Southwest experienced an unusually large number of employees refusing to waive the rule, forcing the Company to fill another shift with mandatory overtime rather than working the scheduled shift at double time.

While Southwest cannot definitively identify the reason for the increased sick calls among ramp service employees in Midway at this time, it was widely perceived to be a coordinated job action to protest the slow progress in collective bargaining that had been ongoing since 2011. That perception, in turn, made it more difficult for Southwest to deal with the increase in absences. For example, one vendor that could have provided Southwest with temporary employees, and had originally agreed to do so, backed out on the ground that it did not want to become involved in Southwest’s “labor problems.”

The operational problems created by increased sick calls were exacerbated by a week of extraordinarily severe weather in Chicago due to what meteorologists called a shift in the “polar vortex.” On New Year’s Eve and New Year’s Day, Chicago temperatures dropped into single digits, increasing the work load because of increased requirements for deicing. On January 2, 2014, things got much worse. While Southwest expected based on historical experience that the spike in sick calls on New Year’s Day to return to normal on January 2, roughly 30% of the ramp service employees called in sick while another 46 employees, representing 15% of the workforce, declined assignments under ten-hour rest rule. At the same time, a snow storm that Southwest thought would dissipate in the early morning continued all day, dumping a foot of snow at Midway. The slow “turn times” caused by a combination of adverse weather and inadequate ramp service staffing created a snowball effect in which all of the available gates were filled with aircraft that could not depart, often because the flight crews were on incoming aircraft that could not reach a gate. As a result, Southwest’s Midway operations suffered what has been described as an “operational meltdown,” with 66 aircraft on the ground at one point, many of which could not reach a gate to unload the passengers for several hours, and 55 empty aircraft stranded at Midway overnight, approximately twice the normal number.

While the operational problems on January 2 were not directly attributable to attendance issues among the ramp service employees, the operational morass created even more work for a smaller workforce because the inability to get aircraft to and from the gates resulted in thousands of checked bags missing the connections to other cities. By January 3, 2014, Southwest faced the daunting task of restoring 7500 pieces of luggage to customers spread throughout the U.S. This included roughly 2000 to 3000 unclaimed bags at Southwest’s baggage check area and some 5500 bags loaded on baggage carts on the tarmac, carts which were needed for the normal operations. These bags had to be sorted and either delivered to the passenger in Chicago or sent on another Southwest flight to the passenger’s arrival city.

After determining the extent of the staffing problem at Midway, Southwest dispatched a 737 aircraft from Dallas filled with both management personnel and roughly 60 ramp service or other employees who had volunteered to assist at Midway. Southwest also recruited another 50 volunteers from other stations. Over the next few days, most of these employees worked 16-hour days or longer but were hampered by various factors. Between January 3 and January 5, 2014, by using temporary employees from other cities to sort baggage and by cancelling more than half of the regularly scheduled flights to MDW, Southwest was able to stabilize the operations at Midway. The staffing problems among Midway-based ramp service employees continued, however, with 49 call-offs (17.5%) on January 3, 43 on January 4 and 44 on January 5, as well as a continuing pattern of employees invoking the ten hour rest rule and declining overtime.

Indeed, the stark differences between the work patterns of the temporary employees who flew in from other cities to help and the reluctance of the Chicago-based employees created a strained relationship between the two groups. The Midway operations deteriorated further, however, on January 6, 2014, when the “high” temperature in Chicago dropped to -1 and the low dropped to -15. On that date, the number of call-offs jumped to 89, or roughly 30 percent of the employees scheduled to work that day. On the morning of January 7, 2014, after Southwest received another 50 call-offs for the morning shift alone, Southwest determined that it had no option but to take emergency steps to bring the sick leave levels at Midway under control. As a result, on January 7, 2014, Southwest’s Managing Director – Ground Operations Steve Goldberg issued a memorandum, a copy of which is attached to TWU’s moving papers as Exhibit 1, declaring a State of Operational Emergency.

Under Goldberg’s memorandum, Southwest announced actions explicitly or impliedly permitted under the Local 555-Southwest Agreement that it intended to take in light of the operational emergency. First, Southwest required than any employee who called in sick beginning on January 8, 2014, would be required to present a doctor’s note establishing that he or she was, in fact, ill, and that failure to do so could be considered sick leave abuse. Article 23-A of the Local 555-Southwest Agreement explicitly provides that “[u]sing sick leave or sick pay for a purpose other than that intended constitutes abuse. Abuse of sick leave or sick pay shall warrant immediate termination.” Taken together with Article 1.A – which provides that the Agreement’s purpose is to further “the well-being of Southwest’s Customers, the efficiency of operations, and the continuation of employment under reasonable working conditions,” and that it is “the duty of the Company, the Union, and the Employees to cooperate fully to attain these purposes” – and Article 2.C – which provides that Southwest may issue reasonable rules and regulations “not in conflict with the terms and conditions of this Agreement,” Southwest believed that it had the right to implement a requirement that employees reporting sick provide a doctor’s note during an operational emergency caused by abnormally high employee absence rates.

Second, Southwest stated that employees who refused mandatory overtime would be considered for potential discipline. Article 7 § I.6 of the Southwest-Local 555 Agreement provides Southwest with the right to require mandatory overtime in the event an insufficient number of employees sign up for voluntary overtime. Article 20 sets forth the procedures with respect to Southwest’s discipline of employees for just cause. Thus, Southwest had the right to discipline employees refusing mandatory overtime in violation of Article 7.

The State of Emergency declared in Goldberg’s memorandum of January 7, 2007, remained in effect for only 33 hours. Following issuance of the memorandum, call-offs rapidly dropped to normal levels, and by 9:30 a.m. on January 9, 2014, Southwest concluded that the memorandum could be rescinded.

Ethiopian Airlines Enterprise is looking to add single-aisle and wide-body planes to feed an expansion as it studies Los Angeles, Madrid and Jakarta for future destinations, its chief executive officer said.The airline has asked Airbus Group, and Bombardier Inc. for proposals for the purchase of 10 to 20 single-aisle planes, and is also considering twin-aisle planes, either the Boeing 777X or Airbus’s A350, of which it has already ordered 14, CEO Tewolde Gebre Mariam said today.

The Addis Ababa-based airline has 62 aircraft in its fleet, including 13 Boeing 737 new-generation planes and five 787 Dreamliners and wants to increase its stable in part to replace older Boeing 767s on lease and to expand across the globe, Gebre Mariam said in an interview at an aircraft finance conference sponsored by Airline Economics in Dublin.“We’ve got Tokyo, Shanghai and Vienna coming this summer, and we’re studying flights to the West Coast, to Los Angeles,” he said. In the U.S., the airline already serves Washington with its large Ethiopian population, the CEO said.In the single-aisle category, the airline is looking at Boeing’s 737 Max, Airbus’s A320neo, and also Bombardier’s CSeries. Gebre Mariam said it would be difficult to run a mixed-fleet of both Boeing and Airbus single-aisle planes, as there is no commonality in pilot training or spare parts.“We’ll have to see what’s in the proposals,” he said. The airline needs new single-aisle airliners from 2015 or 2016. Airbus has said its A320neos are sold out until about 2019. Boeing’s first 737 Max aircraft are set to begin service in 2017.Of the 12 Boeing 767s operated by Ethiopian, three are owned and the rest is leased. Gebre Mariam said he wants to replace the older leased planes with either 787s or Airbus A330s, which he would also lease.

Taking out complex call options or even buying a refinery are some of the measures airlines should consider as they try to combat volatile oil prices, air finance industry experts said.

Jet fuel can account for anywhere from between 20 and 50 percent of an airline's operating costs, and predicting oil prices is a headache.

"No one knows where oil prices will be in six months, let alone 10 years away," James Dempsey, Ryanair group treasurer, told a conference hosted by Airline Economics on Monday. "Oil prices are one of the biggest risk factors in the business."

Delta Air Lines bought its own refinery in 2012 to address the risks from fuel prices.

Even though the refinery turned only a small profit for the first time in the third quarter of 2013, over 60 percent of air finance executives polled at the conference on Monday believed this was a good move.

Some airline executives took a more cautious stance to such a suggestion however.

"We'll keep an eye on how successful they are," Gerry Laderman, senior Vice President for Finance and Treasurer at United Airlines told Reuters on the sidelines of the conference.

Mike Corley, the chief executive of Mercatus Energy, an independent energy hedging, trading and risk management advisory firm, said airlines should take a more active approach to hedging fuel costs.

He gave the example of call options, which can be expensive but then protect airlines from rises in fuel prices, whilst also letting them track falls in the oil price.

"Airlines are very good at mitigating risk across the business but managing commodity price risk is often an area where they fall short," Corley said.

However, some airlines, badly burned from hedging losses in volatile oil markets, have scaled back hedging activities and more may follow.

US Airways, which stopped hedging, is in the process of a merger with American Airlines, leading some to question what American's future hedging strategy will be.

"The U.S. industry right now is interesting," United's Laderman said, pointing to American. "Are they now going to stop hedging?"

Tuesday, January 14, 2014

Air New Zealand 777-319(ER) (38407/921) ZK-OKO captured at Los Angeles International Airport (LAX/KLAX) on December 17, 2013 sporting the special "Hobbit - The Desolation of Smaug" livery.

(Photo by Michael Carter)

Air New Zealand has been named the top airline of 2013 by a safety and ratings review website which heaped unrestrained praise on the carrier for its in-flight services and safety performance.

Named the Airline of the Year for 2013, editors of AirlineRatings.com described the Kiwi carrier as an industry trendsetter, notably for programs like Skycouch which can transform three economy seats into a couch, ideal for couples or families with a young child.

Their specially designed Spaceseats, available in premium economy, also allow passengers traveling together to swivel their chairs and share a meal facing one another.

The design likewise prevents passengers from reclining their seats into the space of fellow travelers. Instead, the chairs slide forward like a reclining lounge chair.In the online world, the carrier has endeared itself to digital consumers for its cheeky and entertaining in-flight safety videos.Last year, their Hobbit-inspired video “An Unexpected Briefing” featured orcs, hobbits, elves and dwarves and became an instant viral video hit.The airline was then able to up the ante by recruiting the world’s favorite nonagenarian Betty White to star in a new video set in a retirement home, which was released this year.Air New Zealand also nabbed the award for Best Premium Economy Class.Other winners in the Airline Excellence Awards include: